298 



various technologies, to view and develop a way to take that into 

 consideration. 



The second broad area of at least concern that I would flag is the 

 subject of debt guarantees. And while we as a firm or an organiza- 

 tion recognize BPA's mandate, if you will, particularly in working 

 with its municipal customers to provide debt financing or debt 

 guarantees in conjunction with those projects, we are concerned 

 that that particular vehicle can substantially distort market signals 

 and that in the process of providing such a guarantee, there are 

 really two what we would perceive as quite substantially different 

 considerations that we would hope would be taken into account. 



The first is the true economic financial benefit to the individual 

 municipal utilities is an aggregation of projects of relatively small 

 size in order to achieve market efficiencies. We think, under a 

 broad BPA umbrella, that is a very effective use of that particular 

 authority. 



On the other hand, a debt guarantee can very quickly become a 

 substitute for project risk and you can certainly have the situation 

 where a less than proven project finds itself in the marketplace 

 competitive or superior to a project with substantially less risk, 

 simply because of the guarantee of the indebtedness. 



We think that that is a very easy, practical and routine thing to 

 avoid. Virtually all large mxuiicipal power projects that we are oth- 

 erwise involved in require performance guarantees. There's an in- 

 surance industry in the United States which routinely prices and 

 provides those performance guarantees. 



And the simple inclusion of a performance guarantee require- 

 ment in any project in which BPA guarantees a debt would seem 

 to us to eUminate the risk associated with the project performance 

 and limit the particular authority to improving the competitiveness 

 of the financing by its aggregation and size in the marketplace. 



And with the green fight still on and in the interest of energy 

 conservation, I'll leave those two items highlighted. 



Thank you. 



[Prepared statement of Mr. Alderson follows:] 



